Category Archives: Market inefficiencies

"Could the party be drawing to an end for bond investors?"

This story by Tim Bond in Thursday’s Financial Times, provides an excellent explanation of how a change in the universe of bond investors has produced new outcomes, like a difficult-to-explain negative yield curve. It also looks prescient in light of the plummet in long-dated Treasuries that day. Bond’s article says that “long term bonds are […]

Read more...

Why Fish Stocks Are in Danger: Subsidies

Ever since we learned that the perilous state of the oceans is a top 25 underreported story, we decided to our bit to rectify that by giving articles on the state of the seas more prominence. At current fishing rates, fish stocks will collapse by 2050. But why hasn’t the invisible hand interceded? If fish […]

Read more...

The Downside of Securitization

Michael Panzner of Financial Armageddon provides a nice synopsis of the oft-unappreciated adverse consequences of securitization. One element that is not inherent but seems inevitable is that the profits in the transaction are front-loaded, taken more as fees and less as spreads over the cost of funding over the life of the transaction. As he […]

Read more...

Were Half the Subprime Borrowers Ripped Off?

That’s what Lewis Ranieri, who can lay claim to founding the mortgage-backed securities market, said in presentation at a Milken Institute conference last week. He asserted that 50% of the subprime borrowers qualified for loans from the FHA, Freddie Mac, or Fannie Mae on much more favorable terms. Tanta at Calculated Risk looks to see […]

Read more...

Are Doctors Overrated?

One of the obstacles often cited in reining in US medical costs is that doctor salaries would have to fall, and therefore good people would no longer come into the profession (they’d either launch a hedge fund or go into the unregulated, better paid part of the business, like plastic surgery). But that assumes that […]

Read more...

Financial Times Uncovers Widespread Carbon Trading Fraud

The Financial Times, in a series of articles published today, probes the workings of the carbon trading business, and uncovers widespread fraud: buyers paying for reductions that don’t occur, organizations extracting large carbon reduction payments for programs they were going to implement regardless, clueless or complicit brokers, offset programs that are shams. We have been […]

Read more...

FT Editorial in Favor of Carbon Taxes

Count on the Financial Times to make a clear, compelling argument. From its editorial “CO2 needs a price but taxes are the best way to set it:“ The Kyoto protocol to fight climate change expires in 2012. The shape of a successor treaty is still in doubt, but one aspect seems certain: carbon trading will […]

Read more...

EU Really Losing Patience With Microsoft

Microsoft’s bad behavior may finally catch up with it. The EU is now threatening new sorts of punishment for Microsoft’s intransigence and bad faith dealings in what in the US would be called the remedy phase of its antitrust case. To recap the story: in December 2004, Microsoft lost its final appeal on an EU […]

Read more...

Real Estate Appraisers Pressured to Give Higher Valuations

Another sign of the times: appraisers are routinely prodded to sign off on a higher price than they are inclined to, but arm-twisting or bribery by the seller is becoming pervasive. National Appraisal Survey found that 90% of 1200 participants felt pressured to change their reports, up from 55% in 2003. In addition, there is […]

Read more...

"The Market for Lemons" and Its Implications

An article by Bruce Schneier in Wired Magazine, “How Security Companies Sucker Us With Lemons,” which we found thanks to Slashdot, discusses the work of Nobel Prize winning economist George Akerlof on markets with asymmetrical information: Why are there so many bad security products out there? It’s not just that designing good security is hard […]

Read more...

"What Environment Do We Owe Our Descendents?"

I am normally loath to publish someone else’s post more or less in its entirety, but Brad DeLong’s discussion of some of the more persuasive arguments for investing to arrest global warming is first rate. (And candidly, he references an article by Martin Weitzmen on the Stern Review, the UK report that was the first […]

Read more...

Now It’s Official: Hedge Funds Deliver No Alpha

Ha. We were suspicious in back in 2005 when Edhec-Risk, an asset management research company, issued a report, “Hedge fund industry: is there a capacity effect?” which examined whether various hedge fund strategies were becoming too crowded for the managers for the managers to earn excess returns. And excess return (meaning earning more than the […]

Read more...

Health Care Reform Proposals: Still Off the Mark

Mark Thoma has a good post about the discussion on Hamilton Project director Jason Furman’s health care proposal, which in a nutshell argues that the way to lower health care costs is to have consumers bear more of the costs. That’s the thinking behind Health Care Savings accounts,but Furman tweaks the idea, deeming the original […]

Read more...

Market Failure I: "Money-Driven Medicine"

I always take note when a writer takes a position that is contrary to his usual stance. Tyler Cowen of Marginal Revolution is an intelligent and thoughtful commentator, but hews too closely to free market orthodoxy for my taste. But his review of Maggie Mahar’s Money- Driven Medicine, a hard-hitting critique of health care, American […]

Read more...

Market Failure II: Corporate Bankruptcy

In her Sunday New York Times column, “‘For Sale’ May Mean ‘You Lose’,” Gretchen Morgenson notes in passing that bankruptcies don’t get as much attention as sexier mergers or IPOs (and it’s confirmed by the dearth of comment on the usual suspect sites in the blogsphere). But there is a lot of money made in […]

Read more...